Kenya risk score higher than 2007 disorder


Matthew Turner
Published on:

Electoral reform should reduce the chances of political violence in the upcoming Kenyan election, analysts say, but Euromoney Country Risk data provide reasons for caution.

Kenya should be spared the election violence that marred the country in 2007/2008, due to improvements in institutional reforms and electoral reform, claims Eurasia Group.

Kenyans go to the poll in March, with two front-running candidates leading the campaign. Relatively few economic policy differences exist between these candidates: prime minister Raila Odinga and deputy prime minister Uhuru Kenyatta.

“Recent updated surveys show the race tightening with Odinga’s CORD polling at 43% versus 40% for Kenyatta’s Jubilee,” reports Eurasia.

ECR analysts, on the other hand, have erred on the side of caution this time around. A comparison of the country’s political assessment criteria reveals that Kenya has become even more risky since the last election. Kenya’s political assessment score has deteriorated 3.5 points since March 2008, to 35.7 in February 2012.

                                               Source: ECR
Excluding Zimbabwe, Kenya slipped furthest in the ECR rankings for SSA, with ECR contributors shedding 3.9 points off the country’s overall risk assessment score. This led Kenya to slip into tier five after falling 12 positions in the global rankings last year.

Although Kenya’s ECR score of 35.2 is above the African average of 29.0, the sovereign has failed to improve on its initial score of 37.3 when Euromoney began its country risk survey 20 years ago.


High political and institutional risk means the economy has failed to improve its risk ranking for the past 20 years. The sovereign’s political assessment score, on a score of 35.7, is the riskiest of the country’s assessment criteria.

However, of most concern to ECR analysts in 2012 was the country’s deteriorating macro-economic performance. ECR analysts downgraded Kenya’s economic assessment score by 0.8 points to 41.1 in 2012.

The constraints on economic growth posed the most risk to the country’s economy last year, after the country’s real GDP outlook indicator recorded the largest fall among the country’s economic indicators, falling by 0.5 points to 4.5 in 2012. The score adjustment has left Kenya with the weakest economic outlook score among Africa’s B-rated sovereigns.

Pre-election jitters could account for Kenya’s score decline. The country has entered into an election cycle, with voting due to be held in March. The political unrest that swept through the country in 2008 was triggered by political grievances and it is feared the same could happen again in 2013.

It might be too early to tell how the election outcome will impact on Kenya’s risk assessment in 2013. Nevertheless, ECR attempts to paint a picture of the country’s post-election environment, through piecing together the views of several research institutions.

Impact of last election on economy

Renaissance Capital

“GDP growth in 2008 was hit hard, falling from 7.1% in 2007 to a mere 1.7%. While the post-election violence lasted about two months, its impact had far-reaching consequences in some sectors.

“The hardest-hit sectors included agriculture, which declined 5%, and hotels and restaurants (a proxy for tourism), which declined 36%.

“We highlight, however, that agriculture was affected not only by election turmoil but also by adverse weather conditions that led to drought in parts of the country. Even the decline in tourism cannot be fully attributed to the post-election violence – some was a result of the worldwide growth slowdown following the global financial crisis.”

African Development Bank

“Although the Grand Coalition government, put in place after the post-election crisis of early 2008, brought two different political parties to form a government, their performance has been commendable.

“Co-ordination between the office of the president and that of the prime minister has functioned well and restored stability in government functions.”

Looking ahead to this year’s election

Renaissance Capital

“On March 4, Kenyans will go to the polls to elect a new president and several other government officials. Local opinion polls suggest that the presidential contest is likely to be a two-horse race between prime minister Raila Odinga and current deputy prime minister Kenyatta.

“The election is significant for two reasons: 1) the previous presidential election, in 2007, was marred by violence that persisted for the next two months; and 2) Kenyatta and his National Alliance running mate, [William] Ruto, are due to stand trial this year at the ICC. A Kenyatta victory over Odinga could have a far-reaching impact on the country.”

Standard Bank

“Elections do not justify an overweight allocation to cash. Part of the curve steepening is explained by concerns regarding the elections on March 4, 2013. Yet there is no compelling empirical evidence that election periods are associated with higher rates in Kenya.

“The election period could just as easily lead to under-spending of the development budget as over-spending of the recurrent budget. Thus there is no reason for one to suspect that the borrowing requirement will necessarily be larger than provided in the supplementary budget just because of the elections.”

Eurasia Group

“While near-term instability and violence are likely through the April run-off, medium-term state stability is not threatened.
“This is due to several factors, including a reformed judiciary, a moderately more credible election commission and heightened vigilance from civil society. The improved judiciary, introduced with adoption of a new constitution (largely in response to the 2008 violence), will serve as a first stop for any election related dispute.

“This is a significant development as Odinga’s supporters bypassed the court and took directly to the streets in 2007 due to a deep mistrust in the previous institution. The Independent Electoral and Boundaries Commission (IEBC) is viewed as substantially more independent than its predecessor, which was clearly aligned with president Kibaki.

“The IEBC’s actions have been heavily scrutinized by a much more vocal and vigilant civil society, including via new social media platforms. In addition, neither candidate is a presidential incumbent nor does either enjoy the backing of outgoing president [Mwai] Kibaki, making vote rigging more difficult.

“While Kenyatta comes from the same ethnic group as the president, rising tensions over the pending ICC case at The Hague and Kibaki’s preference for Kenyatta to stand aside until the case concludes have estranged the two.”

Market implications

Eurasia Group

“Political instability ahead of the elections has already translated into market volatility, which is likely to persist through the second round. Improved central bank monetary policy management has boosted market confidence, but election uncertainty will probably lead to further weakening of the shilling in the coming months.

“The Nairobi Stock Exchange (NSE), the best-performing single country frontier markets index in 2012, with a 54% return ahead of Nigeria’s 52%, will probably trend downward on election-related volatility, but the NSE will likely rally once the election uncertainty settles.”

This article was originally published by Euromoney Country Risk. To find out more: register for a free trial at